VisionChina Media Inc, one of China’s largest out-of-home digital television advertising networks on mass transportation systems, today announced an agreement to acquire Digital Media Group (“Digital Media Group”), a leader in China’s subway mobile television advertising market. The transaction will create the largest and most comprehensive mobile television advertising network in China, furthering VisionChina Media’s goal of becoming the foremost digital television platform reaching daytime audiences in China.
The total consideration for the transaction is US$160 million in cash and shares payable by the Company to eligible shareholders of Digital Media Group in three installments over two years including the first installment of US$100 million payable at the closing of the transaction. Two subsequent installments of US$30 million each will be paid on the first and second anniversaries, respectively, of the closing of the transaction. Of the initial US$100 million, US$40 million will be paid in cash and US$60 million will be paid in shares.
The transaction has been approved by both companies’ boards of directors and is expected to close, subject to the completion of customary due diligence and closing conditions in the first quarter of 2010.
Upon closing, the combined company will operate bus networks in 18 of China’s most affluent cities, including Beijing, Guangzhou and Shenzhen. The combined company will also have exclusive subway networks in eight key cities in China, including all four of China’s Tier I cities, Beijing, Guangzhou, Shenzhen and Shanghai, as well as on Hong Kong’s Airport Express line. According to Analysys International, VisionChina Media operated 42.1% of the digital mobile television screens and Digital Media Group operated 8.1% of the digital mobile television screens in China in the first half of 2009. The combined company will provide a strong platform for the long-term development of the nationwide digital mobile television industry in China.
“Combining our company with Digital Media Group is an exciting and important development for VisionChina and our industry,” said Mr. Limin Li, chairman and chief executive officer of VisionChina Media. “With the largest mobile television advertising network in China, covering each of China’s most economically developed Tier I cities, this combination will fully integrate VisionChina’s leading outdoor digital mobile television advertising network and Digital Media Group’s national subway mobile television advertising network into one seamless network, reaching the above-ground bus network and the below-ground subway network in cities nationwide.”
Mr. Li also noted that governmental policies in China support extensive development of new, massive public transit systems in China and that subway systems have become common in large cities as a vital form of transportation.
“The combined company’s fully integrated advertising network will deliver real-time television programming to passengers during their commutes, further strengthening advertising value for our clients,” continued Mr. Li. “Upon the deal’s closing, VisionChina will enjoy an enhanced market leading position, as well as significant synergies across the two complimentary business platforms.”
Mr. Li added that the combined company will be well positioned for future expansion of media resources in key cities and will immediately benefit from vast opportunities presented by the 2010 Shanghai Expo.
Thomas Tsao, Digital Media Group’s chief executive officer said, “The decision to merge Digital Media Group with VisionChina is a win-win move for both companies. By allowing VisionChina’s leading nationwide sales force access to Digital Media Group’s subway network in China’s largest cities, including Shanghai, significant sales opportunities will be created for the combined company. In addition, customers of both companies will benefit from seamless access to our enlarged national network and enhanced offerings of bus and subway combination cities.”
“By giving VisionChina a strong foothold in all four of China’s Tier I cities, where approximately 60% of China’s advertising dollars are spent, as well as immediate access to the important Shanghai market, this transaction is a great step forward in VisionChina Media’s strategic expansion plan and should create strong shareholder value in the near term,” said Scott Chen, VisionChina Media’s chief financial officer. “The Digital Media Group platform brings additional complementary capabilities in content production and information technology as well as complementary assets such as the Shanghai bus shelter network and the Hong Kong Airport Express line. Digital Media Group has demonstrated a history of strong growth and innovation since its inception in 2002 and is supported by world-class venture investors including Gobi Partners and Oak Investment Partners. Due to the similarities in our business models and customer base, we expect significant synergies to be realized, and in the coming weeks, we look forward to continuing to work together closely to further quantify such synergies as we develop our integration plan.”
Source: Digital Media Group